Raylo Chemicals Inc. v. Axa Pacific Insurance Co., (1999) 242 A.R. 45 (QB)

• Judge: Girgulis, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: March 12, 1999
• Citations: (1999), 242 A.R. 45 (QB)

Raylo Chemicals Inc. v. Axa Pacific Ins. (1999), 242 A.R. 45 (QB)

MLB headnote and full text

Temp. Cite: [1999] A.R. TBEd. MR.123

Raylo Chemicals Inc. (formerly Raylo Chemicals, a division of Terochem Laboratories Ltd.) (applicant) v. AXA Pacific Insurance Company, (formerly Laurentian Pacific, a division of Laurentian P & C Insurance Company) (respondent)

(Action No. 9703-16001)

Indexed As: Raylo Chemicals Inc. v. Axa Pacific Insurance Co.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Girgulis, J.

March 12, 1999.

Summary:

Forest Contract Management Ltd. sued Raylo Chemicals Inc. for breach of contract and negligence arising out of a construction contract. Raylo applied for an order that its insurer, AXA Pacific Insurance Co., defend the action on its behalf, pursuant to the terms of its comprehensive general liability in­surance policy with AXA.

The Alberta Court of Queen's Bench dismissed the application.

Insurance - Topic 725

Insurers - Duties - Duty to defend - The Alberta Court of Queen's Bench stated that generally, the duty to defend was broader than the obligation to indemnify because, in order to require an insurer to defend on behalf of the insured, it was not necessary to establish that the action against the insured would succeed on some part of the claim that was within coverage - Rather, an insured need only establish that the action and the damages claimed were the kind of action and the kind of damages intended to be covered by the terms of the insurance policy - See paragraphs 1 to 5.

Insurance - Topic 725

Insurers - Duties - Duty to defend - Forest Contract Management sued Raylo Chemi­cals for breach of contract and negligence arising out of a construction contract - Raylo applied for an order that its insurer, AXA Pacific Insurance, defend the action on its behalf, in accordance with the terms of its comprehensive general liability in­surance policy with AXA - The Alberta Court of Queen's Bench reviewed the policy and the law and dismissed the ap­plication - Raylo's policy stated, inter alia, that AXA agreed to indemnify Raylo for liability which it becomes obligated to pay "for damages because of ... injury to or destruction of property, including loss of use thereof, ... due to an accident or occur­rence" - This action was for damage to the financial interests of Forest - It was a claim for pure economic loss - No injury or destruction of property had occurred - Accordingly, the claim did not fall within the policy's scope - See paragraphs 1 to 32.

Insurance - Topic 6864

Liability insurance - Business - Compre­hensive policy - Damage to property - What constitutes - [See second Insurance -Topic 725 ].

Insurance - Topic 6877

Liability insurance - Business - Compre­hensive policy - Construction contracts - Extent of coverage - [See second In­surance - Topic 725 ].

Insurance - Topic 6877

Liability insurance - Business - Compre­hensive policy - Construction contracts - Extent of coverage - Forest Contract Man­agement sued Raylo Chemicals for breach of contract and negligence arising out of a construction contract - The breach resulted in increased construction costs to Forest - Raylo applied for an order that its insurer, AXA Pacific, defend the action on its behalf pursuant to the terms of its compre­hensive general liability insurance policy with AXA - The Alberta Court of Queen's Bench dismissed the application - It was not probable that between Raylo and AXA, it was intended that there would be cover­age for any increased cost of con­struction to Forest (and nothing more) occasioned by Raylo's negligence or breach of its contractual commitments - "That would be outside the reasonable contemplation of business persons taking out a general liability policy" - See para­graphs 29 to 32.

Cases Noticed:

Nichols v. American Home Assurance Co. et al., [1990] 1 S.C.R. 801; 107 N.R. 321; 39 O.A.C. 63; 68 D.L.R.(4th) 321, refd to. [para. 4].

Fenton v. Thorley (J.) & Co., [1903] A.C. 443 (H.L.), refd to. [para. 16].

Ohio Casualty Insurance Co. v. Bazzi Construction Co. (1987), 815 F.2d 1146 (C.A. 7th Circuit), refd to. [para. 16].

Hildon Hotel (1963) Ltd. v. Dominion Insurance Corp. et al. (1968), 1 D.L.R.(3d) 214 (B.C.S.C.), refd to. [para. 18].

Winnipeg Condominium Corp. No. 36 v. Bird Construction Co. et al., [1995] 1 S.C.R. 85; 176 N.R. 321; 100 Man.R.(2d) 241; 91 W.A.C. 241, refd to. [para. 22].

Blanchard v. Halifax Insurance Co. (1996), 184 N.B.R.(2d) 271; 469 A.P.R. 271; 40 C.C.L.I.(2d) 258 (T.D.), refd to. [para. 22].

Privest Properties v. Foundation Co. of Canada Ltd., [1992] I.L.R. 1-2737; 57 B.C.L.R.(2d) 88 (S.C.), refd to. [para. 23].

Canadian Equipment Sales & Service Co. v. Continental Insurance Co. (1975), 59 D.L.R.(3d) 333 (Ont. C.A.), refd to. [para. 23].

Greenwood Forest Products et al. v. United States Fire Insurance Co. (1982), 35 B.C.L.R. 323 (S.C.), refd to. [para. 24].

International Radiography and Inspection Services (1976) Ltd. v. General Accident Assurance Co. of Canada (1996), 193 A.R. 1; 135 W.A.C. 1 (C.A.), refd to. [para. 28].

Authors and Works Noticed:

Blacks Law Dictionary (5th Ed.), generally [para. 18].

Concise Oxford Dictionary, generally [para. 18].

Counsel:

Phyllis A. Smith, Q.C. (Emery Jamieson), for the applicant;

Eric Macklin, Q.C. (Duncan & Craig), for the respondent.

This appeal was heard before Girgulis, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following judgment on March 12, 1999.